Wealth and Assets in Scotland 2006 - 2012

6. Movements Across Deciles and Wealth Bands

This penultimate chapter describes the extent to which households in the survey moved between wealth deciles and wealth bands between 2006/08 and 2008/10 and between 2008/10 and 2010/12. Wealth deciles have been discussed above. 'Wealth bands' are defined on the basis of set boundaries that remain the same over time and show the absolute position of a household in a pre-defined distribution. Wealth bands are more appropriate for illustrating movement over time where there are large numbers of households with the same value of wealth, or where households cannot be separated into higher or lower deciles, as is the case for financial, property and physical wealth.

This analysis was restricted to the longitudinal sample only, i.e. those households that were interviewed at all survey waves. This means this analysis follows people over several years and as such this sample will increase in age over this period. It may be expected therefore that this group might be more likely to accumulate wealth between waves and so it should not be assumed the whole population has seen an increase in wealth on the basis of this analysis.

6.1 Movement across total wealth deciles

Key points:

• Just under half of households remained in the same wealth decile between 2008/10 and 2010/12, and about the same amount moved up as moved down.
• This is a lower level of movement than between 2006/08 and 2008/10, when 38 per cent of households remained in the same decile.

Chart 6.1 shows the movement of those households included in both waves across different wealth deciles. Just under half (49 per cent) of households stayed in the same wealth decile in 2010/12 as they were in 2008/10. Almost the same percentage moved to a lower wealth decile (26 per cent) as moved to a higher one (25 per cent).^[5]

Movement within the distribution appears to have slowed down over time. Between 2006/08 and 2008/10, 38 per cent of households stayed in the same decile, while 34 moved up, and 28 per cent moved down.

Chart 6.1 Movement across household wealth deciles, 2006/08 to 2008/10 and 2008/10 to 2010/12

Source: Wealth and Assets Survey, ONS

Note: In wave 1, data on physical wealth was only collected for approximately half of the sample. In order to split the population into deciles, only those that have values for all wealth types are used. Analysis based on deciles may therefore not match the total values for the population but are intended instead to represent the distribution of wealth within the population.

Table 6.1, overleaf, provides details of the deciles the households moved from and to. The rows show the decile the household was in, in 2008/10, while the columns show the decile the household was in in 2010/12. Cells show the percentage of households from a given 2008/10 decile by what decile they are in in 2010/12.

The values in the (green) diagonal present the proportion of households that remained in the same wealth deciles across the two waves, while the yellow cells show those deciles that saw a substantial proportion of 10 per cent or more move into them.

For example, looking at the second row:

• 44 per cent of households who were in the 2nd decile in 2008/10 were also in the 2nd decile in 2010/12;
• 23 per cent had dropped down from the second to the first decile between 2008/10 and 2010/12; and,
• 23 per cent of households had moved up from the second to the third decile over the same period.

Looking at the percentages on the diagonal, we see that most movement occurred amongst households who were in the middle of the wealth distribution in 2008/10, while those in the lowest decile and those in the highest decile were most likely to stay in the same position over time. Households in the third, seventh and eighth deciles were least likely to stay in the same relative position. The majority of moves were into the relevant adjacent deciles.

Table 6.1: Movement of households across total wealth deciles, 2008/10 to 2010/12

Source: Wealth and Assets Survey, ONS

6.2 Movement across wealth bands

This section presents an analysis of movements across wealth bands. This analysis is presented for financial, property and physical wealth only as these wealth types can increase or decrease in value more dynamically than pension wealth. For private pension wealth, this accumulates more consistently across a person's working life, and decreases in value on retirement when income is drawn down. For these reasons, movement across pension bands is not applicable.

6.2.1 Financial wealth

Key points:

• About a third each of the population moved down a financial wealth band, remained in the same position and moved up a wealth band.
• However, slightly more households moved into a lower band by 2010/12 than moved up, a reversal of the situation between 2006/08 and 2008/10.
• The majority of those with negative or zero financial wealth improved their situation and upwards movements were substantial in some cases, e.g. 12 per cent of those with net debts of over £5,000 moved up four bands into the £500-£5,000 category.

There was considerable movement between financial wealth bands. Chart 6.2 shows movement across financial wealth bands: 31 per cent of households stayed in the same band in 2010/12 as they had been in 2008/10. There was a slight general downward movement of households, with slightly more households (37 per cent) moving to a lower band than to a higher band (32 per cent).

However, it should be noted that many of the financial wealth bands are quite narrow, representing the level of savings and debts held by those near the bottom of the distribution with only a small percentage of the population having high levels of financial wealth. This is compared with property wealth where, for those that own property wealth, there is more equitable distribution and a greater range of wealth. As such, the high levels of movement between financial wealth bands might be expected.

The situation was similar between 2006/08 and 2008/10, although slightly more households were accumulating financial wealth, with 36 per cent moving up a financial wealth band, and 30 per cent moving down. The percentage of households maintaining their financial wealth was also slightly higher at 34 per cent.

Chart 6.2: Movement across financial wealth bands, 2006/08 to 2008/10 and 2008/10 to 2010/12

Source: Wealth and Assets Survey, ONS

Table 6.2 provides details of the band households moved to and from between 2008/10 and 2010/12. Again, there was more movement in the middle of the distribution, while those with significant amounts of net debt of over £5000 and those with large amounts of net financial wealth (over 100,000) were least likely to move. Households with zero wealth or debts of less than £500 in 2008/10 were the least likely stay in that band, with 51 per cent having moved up, and 35 per cent having moved down. Similarly, 55 per cent of those with debts of more than £5000 moved into a higher band, and 62 per cent of those with debts of between £500 and £5000 moved upwards. These upwards movements were substantial in some cases: 12 per cent of those with debts of over £5,000 and 23 per cent of those with debts of between £5000 and £500 were in the £500 to £5000 band by 2010/12, an upwards move of four and three bands respectively.

Table 6.2: Movement of households across financial wealth bands, 2008/10 to 2010/12

Source: Wealth and Assets Survey, ONS

Note: Percentages may not sum to 100 due to rounding

Another notable move was that 10 per cent of those in the highest wealth band of over £100,000 moved down four bands into the £5,000 to £12,500 category, suggesting these households were either running down their financial wealth or shifting it into other assets such as property or pensions.

6.2.2 Property Wealth

Key points:

• A large majority (81 per cent) did not change property wealth band between 2008/10 and 2010/12. This is consistent with change between 2006/08 and 2008/10.
• Slightly more households improved their situation than lost property wealth, reflecting rising house prices and mortgages being repaid over time.
• Almost all households without any property wealth remained in this position by 2010/12. However, households with a small amount of properly wealth of less than £50,000 displayed one of the highest levels of movement, with 27 per moving to a higher wealth band.

Chart 6.2 shows the percentage of the sample moving up, staying in the same property wealth band and moving down between 2006/08 and 2008/10 and between 2008/10 and 2010/12.

Chart 6.2: Movement across property wealth bands, 2006/08 to 2008/10 and 2008/10 to 2010/12

Source: Wealth and Assets Survey, ONS

A very large majority (81 per cent) of households did not move between bands between 2008/10 and 2010/12. This reflects the fact that for the majority of households, property wealthy is held in the form of their main residence which households do not generally change often. Slightly more households moved up a band between the two years (12 per cent) than moved down (seven per cent), reflecting house price increases over time and households reducing their property debt by paying their mortgage.

The situation was similar between 2006/08 and 2008/10, with 76 per cent of households showing no movement, 13 per cent moving up a wealth band, and 11 per cent moving down.

Table 6.3 shows the percentage of households moving from a given property wealth band in 2008/10 by what band they were in in 2010/12. This confirms that there was little movement in property wealth, with almost all moves into bands adjacent to the relevant original one.

Table 6.3: Movement of households across property wealth bands, 2008/10 to 2010/12

Source: Wealth and Assets Survey, ONS

Note: Percentages may not sum to 100 due to rounding

Almost all (92 per cent) of households without property wealth in 2008/10 were in the same situation in 2010/12, possibly reflecting the difficulty first time buyers face in being able to access finance in a context of rising house prices, low wage inflation and increases in the cost of living^[6]. However, the second wealth band of £1 to £50,000 displayed one of the highest levels of movement, with only 61 per cent staying in this wealth band, 27 per cent moving up, and 12 per cent moving down.

The highest percentage of movers were found in the second highest wealth band, £375,000 to £500,000, where only 46 per cent displayed no movement. The reasons for this are unclear.

6.2.3 Physical wealth

Key points:

• Physical wealth was the component that displayed the most complex pattern of movement over time. Between 2008/10 and 2010/12, more than twice as many households moved to a higher band as moved down.
• This contrasts markedly with the situation between 2006/08 and 2008/10, when almost equal percentages moved down as moved up. It may be that households sold or did not replace physical assets due to the onset of the global financial crisis, but then started accumulating physical wealth as their situation stabilised.

Chart 6.4 shows the percentage of the sample moving up, staying in the same physical wealth band and moving down between 2006/08 and 2008/10 and between 2008/10 and 2010/12. Between 2008/10 and 2010/12, 45 per cent of households remained in the same wealth band, while more than twice as many (37 per cent) moved up as moved down (18 per cent).

Chart 6.4: Movement across physical wealth bands, 2006/08 to 2008/10 and 2008/10 to 2010/12

Source: Wealth and Assets Survey, ONS

This contrasts markedly with findings from 2006/08 to 2008/10, when only 28 per cent displayed no movement, and almost equal percentages moved down as moved up (36 and 35 per cent respectively). A possible explanation is that households sold physical assets or did not replace worn out assets due to the onset of the financial crisis, but then started accumulating physical wealth again as their situation stabilised.

Table 6.4 shows the percentage of households moving from a given physical wealth band in 2008/10 by what band they were in in 2010/12. This shows a more complex picture of movements between bands than for other types of wealth. Movement rates varied greatly between bands, with the lowest percentage of movers in the second lowest (17 per cent) and third highest band (18 per cent), and the highest in the lowest and highest bands (68 per cent and 66 per cent), but also the third lowest (52 per cent) and the second highest (54 per cent).

Table 6.4: Movement of households across physical wealth bands, 2008/10 to 2010/12

Source: Wealth and Assets Survey, ONS

Note: Percentages may not sum to 100 due to rounding

There was also a lot of movement into bands not adjacent to the relevant original ones, particularly in an upwards direction. For example, ten per cent of households who owned between £8,000 and £12,000 of physical wealth in 2008/10 had moved to the £25,000 to £30,000 category, and 21 per cent had moved to the £15,000 to £25,000 category.